During the November 2018 elections, several states approved the usage of medical marijuana (cannabis), bringing the total states allowing some form of cannabis for medicinal purposes to 33, plus the District of Columbia, Guam and Puerto Rico. Numerous other states allow access to products with cannabidiol (CBD), which is derived from the cannabis plant, but with low to no THC content (the psychoactive component).
As medical practitioners start prescribing it more often for a variety of maladies, cannabis (or some form of it) will become present in the workplace (see our previous article regarding marijuana as it relates to employer policies). The next question employers will ask: Can we cover it under our health plans?
First, it is important to understand that although states continue to decriminalize medical (and sometimes even recreational) use, the use of cannabis is illegal at the federal level. The U.S. Food and Drug Administration (FDA) classifies it as a Schedule I drug (which includes heroin and LSD), which means the drug is defined as having “no currently accepted medical use and a high potential for abuse.” As a result, no Medicaid and Medicare dollars can be used for it. Similarly, the health insurance industry does not consider it to be “medical care.”
While marijuana in itself is not approved for use, some marijuana derivatives (or “man-made” varieties) have received approval by the FDA:
The FDA places these derivatives in a different schedule of drugs than its parent, cannabis. Given there is some medical value to these drugs, as defined by the FDA, these are often covered by federal government programs and private health insurers.
Presently there is little appetite by the insurance industry to cover medical marijuana given its Schedule I status at the federal level. But, given the increasing acceptance for medical marijuana by medical practitioners, patients, and at the polls, insurers may eventually offer some coverage. If conditions continue on a favorable trend for medical marijuana and a health plan decided they wanted to cover it, they potentially could. But there is a catch: because medical marijuana is not considered approved for use, only certain types of plans could actually pay for it and any payment made by the plan would result in a taxable event for the patient.
FSAs, HRAs and HSAs
While a flexible savings account (FSA) or a health reimbursement account (HRA) is limited by internal revenue code (IRC) section 213 prohibiting reimbursements for medical marijuana, a health savings account (HSA) is not subject to the same limitations by law. However, because the FDA has declared medical marijuana to have no medicinal value, the reimbursement is not considered to be a “qualified medical expense” under IRS rules. In short, this means the reimbursement is subject to tax and a tax penalty.
Self-funded health plans
Major medical plans that fall under ERISA jurisdiction (which include most self-funded plans) face similar difficulties to HSAs. Self-funded plans are not limited by IRC section 213, but the plan cannot pay for items unless they have medicinal value. Because of the Schedule I designation from the FDA, the plan member must pay tax on any health plan reimbursement for marijuana.
Even if the plan sponsor (often the employer) wanted to cover medical marijuana, it would need to ensure the plan administrator (TPA) did not consider it to be experimental and investigational, an alternative therapy, or not medically necessary (which would then prohibit reimbursement). Moreover, the plan sponsor must then ensure the stop-loss insurer would not specifically prohibit medical marijuana from coverage and refuse to acknowledge the plan sponsor’s payments when considering the sponsor’s maximum.
Fully insured plans
Fully insured major medical plans could also potentially cover medical marijuana, assuming the insurer is not prohibited from doing so; even in states that have allowed the use of cannabis, insurers may still fall under codes and regulations that have not kept pace. If insurance laws allowed coverage, the participant still faces taxes on any reimbursement from the insurance carrier.
While marijuana remains illegal at the federal level, there has been significant change in the attitude of the medical community and the country in regard to medical marijuana. It is possible insurance carriers may follow suit, but that remains to be seen.
On May 11, 2014, the governor of Minnesota signed the Women’s Economic Security Act (WESA), a bill that will require Minnesota employers to make dramatic changes to their employment policies and practices.
While WESA directly impacts employers who conduct business in Minnesota, the changes follow plans by federal and local governments to expand legal protections for women and other employees. For this reason, employers in other jurisdictions should pay close attention to these national and state law trends.
“The only thing that is constant is change.”
Turns out that dusty old Greek philosophers occasionally say profound things (Heraclitus also said that a man’s character is his destiny). And since the Greeks are considered the fathers of democracy and were responsible for no small number of laws themselves, it seems an appropriate departure point to talk about the constantly changing landscape of employment laws.
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